McDonald’s Franchisees See Strength in Numbers; Some See a Union

McDonald’s franchise owners—a traditionally organizing-averse group—are banding together to gain leverage with their franchisor as the fast-food giant pushes design and operational changes that will increase costs for owner-operators.

The planned changes include increasing the number of restaurants that offer delivery, adding electronic kiosks inside restaurants, and operational changes aimed at improving the speed of drive-through orders. The franchisees say a lot of the changes aren’t proven means of improving profits, and that some previous changes imposed by McDonald’s LLC didn’t produce the intended results, or were scrapped shortly after being introduced.

There are certain requirements to meet the legal definition of a union that the National Owners Association clearly doesn’t reach, and in fact the organization incorporated as a non-profit last week. But labor advocates say the difference in form of the organization doesn’t minimize the substantive similarities to a union.

“I see some inconsistency, maybe hypocrisy, in the position that it’s important for franchisees to have a collective voice because they are relatively less powerful compared to McDonald’s corporate, while failing to see precisely the same dynamic with respect to their workforce,” Charlotte Garden, a Seattle University labor law professor, said in an interview.

“While there are certainly some similarities to employee collective bargaining, there are significant differences,” Matthew Haller, a senior vice president at the International Franchise Association, told Bloomberg Law. “Chiefly, franchise owners are not employees of the brand—they have a vested equity stake in the success of their own individual enterprise” and the success of a brand, he said.

Franchisees do make capital investments that traditional employees don’t, but the NOA’s formation is nonetheless “a case of entities that have relatively little bargaining power individually coming together to increase their collective leverage, and that’s one of the main things a labor union does,” Garden said.

The NOA didn’t respond to Bloomberg Law’s requests for comment.

Franchisees Want to Renegotiate Terms

McDonald’s has “worked closely for decades” with franchisees and maintains “strong channels of communication,” a company spokesperson said. “We always welcome” constructive and collaborative “dialogue with our franchisees,” she said. The spokesperson declined to comment on the NOA specifically.

The company has long had a corporate-controlled representational body for franchisee input. But labor organizers say owner-operators likely saw a need for an independent organization because those mechanisms are inefficient.

The NOA, which was officially incorporated this week, bills itself as a “self funded advocacy group” and “a conduit for the voice” of the owners. The association is largely a response to McDonald’s “Bigger, Bolder Vision 2020,” which modifies franchise agreements and requires expensive changes to restaurants and operations, with franchisees bearing most of the costs.

Already Making Headway?

Franchising consultants and worker advocates interviewed by Bloomberg Law generally agreed that the NOA signals some trouble at the world’s leading food-service retailer.

Over 90 percent of McDonald’s restaurants worldwide are owned by independent operators. The move for negotiating leverage by a significant portion of U.S. owners—the NOA expects “over a thousand” franchisees at a meeting in Dallas Dec. 12–13—indicates some dissatisfaction.

McDonald’s updated its plan, known as BBV 2020, on Nov. 27, making it more favorable to franchisees. The company didn’t respond to questions about whether the NOA influenced the changes.

“My hope would be that this experience makes franchisees more appreciative of the role of a collective voice in the workplace, but I guess we’ll see,” Garden said.

Similar in Form, Substance?

Labor unions’ chief function is to convey employees’ interests and negotiate job terms for a collective group of workers, similar to the NOA’s stated goals. The association also requires annual dues, including a signed membership card that looked much like a union sign-up card before the group introduced a modified form Nov. 28.

But Patrick Semmens, a vice president at the National Right to Work Legal Defense Foundation, said another “key distinction” between the group and most unions is voluntary membership.

People become members of various organizations “because they believe banding together will advance their shared cause, but unfortunately the current union model is not built on the same type of voluntary association,” Semmens said. “What sets unions apart is the government-granted coercive powers they wield, especially over workers who don’t want to join.”

Semmens’ organization recently won a U.S. Supreme Court case that stripped public-sector unions of the authority to collect “fair share” bargaining fees from non-members.

Garden and Catherine Ruckelshaus, general counsel and legal director at the National Employment Law Project, said unions are voluntary organizations and that there isn’t a widespread practice of forced unionization. They also dismissed the notion that organizations like the NOA are entirely distinct because of the members’ capital investments.

“I would reject the implication that workers don’t have skin in the game because they make investments of their physical labor” instead of cash, Garden said.

The NOA “might not be a labor union in the strict sense” but it is a case of business owners organizing for collective bargaining, Ruckelshaus said. “It supports the notion of collective action as a more effective way to bargain with those who have greater leverage.”